Rails Near Terminal

A little over a year ago here on Real Money Pro, I suggested that shares of rail-car manufacturer Trinity Industries (TRN) should be a good buy as domestic rail-car demand rebounded. As orders for new rail cars climbed, industry backlog levels rose and prices for rail cars first recovered then improved. Trinity and other rail-car manufacturers such as FreightCar America (RAIL), American Railcar Industries (ARII) and The Greenbrier Companies (GBX) experienced margin expansion at their rail-car manufacturing operations. Longer production runs and firmer rail-car pricing levels drove significant earnings growth and multiple expansion.

While Trinity shares are well off their 52-week high, they are still up more than 25% year over year. Part of the reason as to why the shares are off their 52-week high has been the softening of the rail-car market over the past few months. According to data from the American Rail Car Institute, third-quarter 2012 rail-car orders totaled 15,151 units, down 7.8% quarter over quarter and down 24.9% compared to third quarter 2011. A sharp drop in third-quarter 2012 industry unit deliveries, down 31% vs. second quarter 2012, combined with that drop in incoming industry order levels resulted in a modest rise in industry backlog levels. In other words, that backlog increase occurred for all the wrong reasons....276 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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